6/28/2004

KUFM / KGPR

T. M. Power

 

The Strange Economics of Conservative Fiscal Policy

 

            At both the state and federal levels our governments face massive problems funding basic government programs while coping with massive holes in their budgets. In Montana, a court order that declared state funding of public schools unconstitutionally inadequate makes a bleak budgetary situation even bleaker. Even without this court-ordered increase in state funding for education, the budget for the upcoming biennium was already hundreds of millions of dollars in the red.  In Washington, conservatives are fighting among themselves over whether to rein in election year pork barrel in the face of growing massive federal budget deficits or whether to reverse their traditional position and declare that red ink and huge federal deficits do not matter as long as Republicans control the government.

            A good deal of this red ink is tied to cumulative tax cuts aimed at big business and the well-to-do.             Conservatives business leaders have long argued that taxing businesses is irrational since it is private business activity that is the source of all employment, income, and wealth.  Taxes discourage or damage the goose that lays the golden eggs. What could be more stupid?  Taxes on business profits, on capital gains, on property or wealth, or progressive taxes on income punish economic success and economic productivity.  Conservative business leaders argue we should, instead, be rewarding economic productivity, not discouraging it by confiscating the wealth that business activity creates.

            From this perspective, we should tax only those activities that are not central to wealth creation. Consumption is an obvious target since it is the opposite of production. Hence the conservative support for sales taxes that apply only to final consumption, not to the purchases that businesses make.  Payroll taxes are also acceptable since they fall on the drones of the economy, workers. Since it is businesses that create jobs and provide workers with tools, equipment, technology, and raw materials, those workers are relatively passive participants in the economy. They can be safely taxed since they have no alternative but to work.  So we tax our workers in ways that make it very difficult for them to dodge the taxes: we withhold the taxes from their paychecks and fund social programs primarily through payroll taxes.

            In Montana we also heavily tax people’s homes. The legislature has spent a dozen and a half years cutting taxes on businesses and quietly letting the slack be taken up by what is left in the property tax base: our homes.  Since our homes are “unproductive” in the sense that they are not used for business purposes, this is fine.  It might also have the advantage of making most of us so angry about the high level of property taxes that we will support a sales tax and further cuts in basic government services. That, too, would nicely fit the conservative agenda.

            The view of the citizenry implicit in this conservative business view is appalling.  To these folks, only a minority of our citizens, the leaders of large corporations, are really “productive.”  Most of us are passive drones who contribute nothing of value.     That is preposterous.  We are all economic actors creating value.  The skills, energy, and responsibility of our workforce are central to the productivity of our economy. The entrepreneurial attitudes of our workers, the self-employed, small business owners, and public servants are the source of the economic energy that fuels our economy. Within our homes we produce many of the most important components of a productive economy: healthy, creative, disciplined children, ethical and cultural values, security and peace of mind, as well as all of the valuable services associated with homes and families. In addition, consumption is not some mindless activity that simply destroys economic value, it is the way we satisfy our needs and desires, which, after all, is the whole point of economic activity. In addition, without that consumption, businesses would have no markets for their products and would have to shut down.

            This corporate economic vision is an elitist, anti-democratic vision that dismisses the vast majority of us as disposable cogs who need to be humored only because large commercial businesses need worker drones. It is a corrosive ideology that celebrates an unbelievably wealthy elite while relentlessly increasing the economic pressure on the rest of us,  driving an increasing wedge in the middle class, pushing most of us downward while a few escape into yuppie nirvana. Meanwhile, public infrastructure and services along with other public goods deteriorate.

            Taxes are the price we pay to live in a modern democratic society and collectively pursue those things that are important to the well being of us all.  Modest levels of taxation on as broad a base of economic activities and outcomes as possible distributes the burden and minimizes the economic disruption. That was the taxation path we were on for most of the 20th century. Over the last two decades we have been abandoning that practical and equitable path as big business interests have steadily shed almost all tax responsibility for supporting the public infrastructure on which they depend. The new path offers us public squalor, public poverty, and heightened inequality. There is nothing forcing onto this path. It is a political choice favored by a particular privileged group. The question is whether the rest of us are willing to passively go along and live in the increasingly uncomfortable corner into which this elite wishes to paint us.